SAFT ON

WEALTH-Don't 'war game' your portfolio

Aug 28 (Reuters) - Investors fearing the impact of an attackon Syria ought to start worrying instead about things they canpredict and control.

In other words - and with apologies to Nathan Rothschild,whose advocacy of buying during times of war is probablyapocryphal anyway - don't "buy when there is blood in thestreets," hold.

Global markets have been roiled in recent days by a risingconviction that the United States will lead military strikesagainst the Syrian government in reprisal for its alleged use ofchemical weapons on its own people. Emerging market assets werehit hard again on Wednesday, while Brent crude oil hit asix-month high of $117 a barrel. Gold also rose, and U.S.stocks, which had fallen on the theme on Monday, recovered a bitof ground.

The news from Syria, wracked by a civil war, is and likelywill continue to be tragic, but for the vast majority ofinvestors by far the smartest thing to do is nothing.

Strikes on Syria very likely will happen, and very likelywill have mild to moderate impacts on a variety of assetmarkets, but you, dear reader, are highly unlikely to get richtrying to figure out how or why.

Let me be clear: I am not saying leave politics to yourelders and betters. Obviously, citizens of the countriesinvolved have a right and obligation to form opinions and takepositions on these things. What they probably ought not to do istake risks for themselves and create fee income for financialservices firms by putting those opinions into investmentpractice.

First off, the way events will unfold in Syria is far fromsimple. The basic rolling news headline narrative - oppressiveregime, faced with existential threat, commits atrocity(ies) andis bombed or faces no-fly zone by allies led by U.S. - is prettystraightforward. How that plays out, however, is very complex,and the aftereffects even more so.

If we examine some past conflicts, we might think we have atemplate of how to "play" Syria. Looking at the 1991 Gulf War,Kosovo in 1999, the invasion of Afghanistan in 2001, theinvasion of Iraq in 2003 and Libya in 2011, we can make somegeneralizations. The S&P 500 tends to sell off ahead ofconflicts but recovers once they start. Oil tend to rise in therunup, and sell off on the news or just before. Gold sometimesrises ahead of fighting and usually sells off when it begins.The dollar tends to divert from whatever its trend was beforethe idea of conflict arose, and reverts to that trend once shotsare fired.

THE FIRE THIS TIME

Well and good, but if you seriously want to put yourretirement and future wealth at the mercy of these types oftrends holding true you are, again, either hugely overconfidentor slightly desperate.

As Kenneth Lam, a markets strategist at Citigroup, pointsout, this time may be different.

"Syria is arguably more complex than these previousconflicts. Military objectives are also not as well defined.Russia and Iran will also weigh in both pre- and post-action.The usual market reaction may be more muted and short-livedbecause of greater uncertainties," Lam wrote in a note toclients on Wednesday.

Michael Wittner, oil analyst at Societe Generale, argued onWednesday that oil could surge to $150 per barrel if theconflict affects important oil producers such as Iraq, in whatwould be a departure from the pattern in recent past conflicts.

Make no mistake, if this happens it will be a big deal.Emerging markets, which are facing their own potential fundingcrunch, particularly don't need high oil prices or a shock tothe financial system just about now. We could easily see anemerging market selloff on oil turn into a selloff in developedmarkets.

But the fact that something might affect the value of yourportfolio, even severely, is not the same as saying you would bewise to bet on that possibility, other than living your life insuch a way that swings in asset prices don't leave youvulnerable to a personal financial crisis.

That, however, is best done by managing your liabilities andoutgoings rather than playing a game of Battleship with yourportfolio.

In fact, the only positive step I would recommend is to putoff rebalancing your portfolio if we get a big selloff justbefore you had planned to pare back assets that have performedstrongly in favor of those that have done less well.

The vast majority of investors simply haven't got theability to reliably call war markets correctly. If they want toavoid being a casualty they are better off sitting this one out.

(At the time of publication, James Saft did not own anydirect investments in securities mentioned in this article. Hemay be an owner indirectly as an investor in a fund. You canemail him at jamessaft@jamessaft.com and find more columns at http://blogs.reuters.com/james-saft)